Health Savings Accounts

A Health Savings Account (HSA) is a tax-exempt trust or custodial account established exclusively for the purpose of paying or reimbursing qualified medical expenses of you, your spouse, and your dependents.† Health Savings Accounts first became available in 2004. Any individual who is covered under a high deductible health plan, does not have coverage under another non-high deductible health plan, is not enrolled in Medicare, and is not eligible to be claimed as a dependent on another individualís tax return may establish an HSA.

Accountholders must have a high deductible health plan: $1,300 minimum annual deductible and $6,450 annual out-of-pocket maximum for self-only coverage and $2,600 minimum annual deductible and $12,900 annual out-of-pocket maximum for family coverage, for the year 2015*.

For calendar year 2015* the maximum annual contribution limit for an account owner with single coverage is $3,350. The maximum annual contribution limit for an account owner with family coverage is $6,650. Catch-up contributions are allowed for accountholders age 55 or older. The limits are subject to cost-of-living adjustments each year.

Any individual, including an eligible individualís employer, may make tax deductible contributions to an HSA. Earnings within the HSA are not taxable, and amounts distributed for payment of qualified medical expenses are tax-free. Any amount left in an HSA at the end of a year may be used to pay future medical expenses.

Health Savings Accounts are a useful way for an employer to supplement high-deductible health insurance and give employees a tax-favored benefit, and the demand for this type of account is expected to increase.

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